The report says the IRS routinely stretches the penalties for “willful” violations of foreign reporting requirements to inadvertent violations, interprets its own guidelines whimsically and unfairly, and makes a practice of hammering small violators disproportionately. The report also criticizes the IRS practice of denying relief for taxpayers who came in from the cold early when it later started applying reduced penalties.

The report includes one awful example of the IRS treating an apartment owned by the taxpayer as a foreign financial account for purposes of computing the penalty for late reporting:

Example : An IRS employee took the position that a taxpayer’s foreign apartment must be included in the “offshore penalty” base solely because the taxpayer filed returns reporting income from the apartment between two and fifteen months late—after receipt of foreign information reporting documents relating to inherited property. The employee concluded the delay in filing returns meant that the apartment was related to tax noncompliance. Under the 2011 OVDI FAQ 35, “[t]he offshore penalty is intended to apply to all of the taxpayer’s offshore holdings that are related in any way to tax noncompliance.” FAQ 35 defines tax noncompliance as follows:

“Tax noncompliance includes failure to report income from the assets, as well as failure to pay U.S. tax that was due with respect to the funds used to acquire the asset.”

The taxpayer timely overpaid her taxes and reported the income from the apartment (albeit on late-filed returns), and the apartment was not acquired with untaxed funds. Thus, the IRS employee’s unreviewable determination to include the apartment in the offshore penalty base appears to contradict FAQ 35.

This indicates an IRS practice of shooting jaywalkers so that it can slap real international tax cheats on the wrists. Especially unrepresented jaywalkers:

These penalties – $2,202 average penalty for an average $268 tax understatement for the smallest accounts – are unconscionable. I defy anyone to say otherwise. Well, anyone who doesn’t work for IRS.

It also indicates that taxpayers who oped out of the voluntary disclosure program got better results — which is a harsh indictment of the way the “voluntary” program treats taxpayers.

The report does praise recent changes to IRS practice, but slams the IRS for not applying them retroactively. The report also recommends that Congress ease up on offshore penalties, including eliminating the penalties when the taxpayer resides in the same country as the foreign account. This would be incredibly useful, eliminating the penalty for committing personal finance while living abroad.

I would go further and make the U.S. tax system territorial for non-residents, to eliminate absurd spectacles like the IRS going after the U.S.-born Mayor of London for capital gains on the sale of his home in London.

Russ Fox, Waiting for Godot. ” If you’re going to call the IRS, expect very lengthy hold times; yesterday I was on hold for 101 minutes before speaking with an IRS representative. I expect the hold times to get far worse as we head into Tax Season.”

Simply put, financial transactions are a very poor tax base. For one thing, it results in “pyramiding:” taxing the same economic activity many times. For another, economists generally think of trades as highly-valuable activity that benefits both parties, given that they both agreed to the deal. Taxing trade itself results in a kind of “lock-in” effect where people hold on to the things they have, whether or not they’re the best people to actually be holding on to them.

He also notes the social value of the ability to easily sell financial assets, one that would be damaged by a transaction tax.

The IRS has announced updated procedures for taxpayers to file overdue FBAR foreign account disclosures. These reports are required of taxpayers who have foreign accounts with balances that exceed $10,000 at any time during the year. Penalties can reach 50% of the highest account balance per year of willful violations.

The new rules provide a streamlined procedure for U.S. residents to begin reporting FBAR non-filing. The procedure had been available only to non-residents. It also has eliminated the inane $1,500 cap on unreported taxes from foreign accounts. Tax Analysts reports ($link):

In addition to permitting resident U.S. taxpayers to use the streamlined program, the IRS has also eliminated the $1,500 tax threshold and the risk questionnaire. Taxpayers must certify that previous compliance failures were not willful.

Under the revised program, all penalties will be waived for nonresident U.S. taxpayers and resident taxpayers will be subject only to a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.

[Attorney Caroline] Ciraolo said practitioners will be pleased that the streamlined program will now be available to residents that previously did not qualify because they were living in the U.S. at the time they initially attempted disclosure.

This liberalization is combined with higher penalties in some cases.

This looks like a positive development, though I still think it should be more liberal. A no-questions asked policy for taxpayers with liabilities under a reasonable threshold, with only interest charged on late taxes, would be even better — especially given the extra penalties on those who come in only when it is clear their banks are going to turn over their names anyway. There are requirements for submitting back foreign account statements, which may not be available.

The IRS doesn’t appear to be applying the relief retroactively, so taxpayers who have already come in voluntarily and paid ridiculous penalties are played for chumps. And the real problem — worldwide taxation under the U.S. tax system — remains. A Wall Street Journal report sums it up:

One potential drawback: Taxpayers who come forward in the future may end up faring better than those who heard about the U.S. campaign in the past and presented their case to the IRS then. For example, experts said, taxpayers from the latter group who owed more than $1,500 in taxes could have paid a penalty as high as 27.5%.

In addition, taxpayers abroad face the risk of double taxation, said John Richardson, a Toronto lawyer who works with U.S. taxpayers living in Canada. “The problem is that, penalties aside, the U.S. tax laws are very punitive for U.S. citizens abroad,” he said.

Programming note: The Tax Update will take Thursday and Friday off this week to tend to a family wedding. We’ll be back as usual Monday.

Former IRS Commissioner Shulman, showing how much he cares for innocent victims of his FBAR war.

Maybe we shouldn’t be shooting jaywalkers? The IRS may be declaring a cease-fire in its long war on inadvertent foreign account violators. Tax Analysts reports ($link) that IRS Commissioner Koskinen told a tax conference that it will be modifying its Offshore Voluntary Compliance Initiative:

“We are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives,” Koskinen told a luncheon audience at the 2014 OECD International Tax Conference in Washington. “We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas.”

Gee, you think so? You really think 25%-300% penalties might not be appropriate for the crime of committing personal finance while living abroad? What could possibly have given him that idea?

Koskinen also pointed to taxpayers residing in the United States with offshore accounts “whose prior noncompliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties.”

“We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA,” Koskinen said.

One of the things that made Doug Shulman the Worst Commissioner Ever was his brutal treatment of trivial inadvertent offshore paperwork filing violators. Hopefully his successor will make coming into compliance voluntarily a transparent, predictable process designed primarily to ensure future compliance. Something like state programs for non-resident non-filers, where taxpayers pay back taxes, if any, and interest for a limited number of open years would make sense People are understandably reluctant to come into compliance when it can mean financial ruin.

The IRS has not released any details of this kinder, gentler approach, so curb your enthusiasm for now.

Having the IRS oversee the designation is not the best idea. I have suggested that the voluntary RTRP-like designation be administered by an independent industry-based organization like an American Institute of Registered Tax Return Preparers (see “It’s Time for Independent Certification for Tax Preparers“).

If the IRS has nothing to do with it, fine. If it does, it will inevitably do special favors for its “voluntary” friends and make like difficult for others.

Robert is a little like the Scarecrow in the Wizard of Oz, looking for a brain. The movie quickly makes clear that the Scarecrow already has a perfectly good brain; all he lacks is a diploma. Robert, a perfectly good (if old-fashioned) preparer, doesn’t need a diploma to save his clients from the Wicked Witch.

Paul Neiffer, Portability Revisited. “With the “permanent” changes in the estate tax laws from about 2 years ago, we now have a permanent provision called portability. This allows for the unused portion of someone’s estate to be “ported” over to the surviving spouse to be used on their final estate tax return.”

According to its champions, the act would protect children from the predations of junk food purveyors. In particular, it would deny manufacturers any sort of tax deduction “for advertising and marketing directed at children to promote the consumption of food of poor nutritional quality.” It would use the resulting revenue to help fund the Department of Agriculture’s Fresh Fruit and Vegetable Program.

That all sounds great. Except for the fact that it’s arbitrary, capricious, and an egregious misuse of tax policy.

The tax law – is there anything it can’t do?

Joseph adds, wisely:

Reasonable people can disagree about what qualifies as a loophole. But by almost any definition, the deduction for advertising junk food is not one.

Once you decide the tax law is a public policy Swiss Army Knife, there’s no logical place to stop.

David Brunori’s righteous anger at taxes on e-cigarettes is now freely available at Tax Analysts Blog: Taxing E-Cigarettes Seems Crazy. “Yet politicians routinely say that e-cigarettes will lead people to start smoking, or worse — use drugs! Are they daft?” No, just greedy.

This will make the homecoming in 2042 a little less awkward. WMUR.com reports:

The woman who, along with her husband, held police at bay during a nine-month standoff in 2007 over tax evasion has apologized to the community.

Elaine Brown’s apology appeared in Plain Facts, a monthly publication written by Plainfield residents.

She said she and her husband Ed were trying to advance the “cause of justice.” She went on to say they “failed to take into account the impact we were having on others in the town. We failed to realize the fear, anxiety and impact we were causing these good people.

She was unable to apologize in person because she has been detained — until November 2042, according to the Bureau of Prisons inmate locator. She should be home in time to invite her neighbors to her 102nd birthday party.

Extended 1040s are due two weeks from today! Sorry for not posting yesterday, but I’m sure many of you understand. I was laying in canned goods and ammo for the government shutdown.

Wikipedia image courtesy Tallent Show under Creative Commons license

The TaxProf has the IRS Shutdown Plan. You can still file, but the examiners get a day off.

I like Don Boudreaux’s take:

If I walk into a supermarket to buy a few artichokes and discover that the supermarket has no artichokes for sale that day, I don’t pay the supermarket for the artichokes that I don’t get. So shouldn’t we taxpayers be relieved of the obligation to pay for the national-government services that we are not now receiving?

It implies the big difference between things we get from businesses and things we get from the government: if we don’t like what they have at one store, we can go to another, but if we don’t like the service from Uncle Sam’s Essentials, we can’t exactly take our business elsewhere.

From 1976 to present there have been 17 shutdowns and like this shutdown, many were caused by political disagreement. For instance, the government shutdown for 12 days in 1977 over a political fight between the House and the Senate over Medicaid policy.

The average length of past government shutdowns is 6.4 days, but this is no indication of how long this shutdown will last. During the Reagan administration there were several shutdowns that only lasted one day.

“Recharacterizing” means, quite simply, we can change the character of the IRA: if the contribution was made to a traditional IRA, we can re-characterize it to a Roth IRA; and if the contribution was made to a Roth IRA, it can be recharacterized to a traditional IRA.

The Health Insurance Marketplace (HIM) opened today! The Affordable Care Act (ACA) mandates that almost everyone must have health insurance by January 1, 2014. The HIM is a way for anyone not covered by an employer’s affordable plan to shop for health insurance. Let’s face it the ACA is complicated and the HIM part is no exception. This post will cover the highlights of the Marketplaces to give you an overview of what will happen.

The Health Care Fairy is the Tax Fairy’s sister. Believers in either one end up disappointed.

One argument made by the industry against the medical device excise tax is that it singles them out for higher taxes. The reality, however, is that the excise tax was passed as one of many levies on various healthcare sectors to help pay for health insurance expansion.

That apparently would include the 10% excise tax on tanning booths that is part of Obamacare financing. They say the tax is paid by something called “various healthcare sectors.” That’s a fancy way to say “patients.”

Readers will recall that, in an unexpected development, Treasury assessed and DOJ Tax sued to collect the 50% FBAR penalty against Carl Zwerner for four years. Up to that point, based on the information publicly available (principally from offshore account plea convictions), Treasury had only assessed a single FBAR of 50% for the highest year. Thus, it was of considerable interest — and angst — to taxpayers and practitioners that Treasury would assert 4 years of FBAR penalties.

Peter Reilly, Has Kent Hovind Given Up Fight Against IRS ? Mr. Hovind is famous for opening a theme park based on the idea that humans and dinosaurs co-existed. I suppose if you hang around politicians, you could conclude that.

Nothing is stopping you from writing a check right now, says a cynical tax blogger. “Tax Us More!” Say Some Wealthy Pennsylvanians(Jim Maule) Because they can pay more taxes any time they want, they really mean “tax other people more.”

Ted Cruz is lucky it wasn’t the other way around. The Texas Senator recently learned that he is an accidental Canadian citizen because he was born in Calgary. His American mom moved back to the U.S. when he was four and the Senator apparently never considered himself a Great White Northian.

Now he plans to “renounce” his Canadianhood, presumably to make his political life easier. That’s fine for him, but I hope he ponders just how lucky he is that his life didn’t go the other way. If Ted Cruz’s mom were a Canadian who brought him into the world in Fargo, and then moved him as a toddler back to Canada, he would be up to his toque in problems with the IRS.

Assume our alternate-world Ted Cruz – we’ll call him Canada Cruz — had become a successful Canadian lawyer and politician. Given his $3.5 million net worth, he certainly would have opened substantial bank and brokerage accounts in Canada. He would have significant retirement plan assets. And, like many accidental Americans, it would probably never have occurred to him that his American citizenship obligated him to file FBAR reports and U.S. tax returns reporting his Canadian income.

The Treasury might claim half the balance of his financial accounts for each year he failed to file Form TD F 90-22.1 — or a mere $10,000 per year if they decided his violation wasn’t “willful.” If he attempted to participate in the OVDI “amnesty” program to clean things up, he would probably be told to cough up “only” 25% of the balances in all of his Canadian accounts, and to file US returns paying tax on “all tax years” covered by the disclosure. Assuming $3 million of his $3.5 million net worth represents financial assets, Canada Cruz would have to fork over at least $750,000 as a result of being an accidental American. Just in case you wonder why people might renounce U.S. citizenship.

US citizens abroad now understand that discovering ties to the US means discovering a world of obligations and consequences flowing from citizenship that you were expected to know and obey. Ignorance of the law being no excuse, the punishments range from the merely ridiculous–many times any tax that would have ever been due–to the infuriating: life savings wiped out and many future tax savings sponsored by your home government, such as in education or health savings plans, treated as offshore trusts and therefore confiscated by the US. Moreover there is no ready escape hatch for the newly discovered and unwanted US citizenship: five years of full tax reporting compliance must be documented, appointments must be made with officials, fees must be remitted, interviews must be conducted, and in some cases exit taxes must be paid. If some in Congress get their way, renunciation could even mean life-time banishment from the US someday soon.

If U.S. politicians had any sense of shame or capacity for introspection, they would take heed of Canada Cruz’s problems and stop U.S. tax law at the border. A humane and sensible IRS would create an easy way for accidental citizens to come into compliance short of financial ruin. As it is, Canada Cruz is just screwed.

Absolutely stunning and wonderful news out of Florida in a highly-publicized offshore account case. From the Palm Beach Daily News:

U.S. District Judge Kenneth Ryskamp sentenced Mary Estelle Curran of Palm Beach to one year probation Thursday on tax charges, before revoking the sentence five seconds later and sending her out of the courtroom a free woman.

Ryskamp chastised the government for prosecuting the 79-year-old woman when 38,000 other people in the same situation were given immunity.

The woman had inherited Swiss bank accounts from her wealthy husband. Her lawyer had tried to get her into the offshore disclosure program, but the IRS turned her down because her name was on a list provided by Swiss bank UBS. She pleaded guilty to two false return charges. The judge blasted the government for bringing criminal charges:

Based on these facts, did it ever occur to the government to dismiss these charges,” Ryskamp said. “Instead, the government decided it had to make a felon out of this woman?”

Mark Daly, from the Department of Justice Tax Division, told Ryskamp that Curran’s husband, Mortimer, was a “very wealthy man” and shouldn’t have turned to a foreign national for an interpretation of U.S. Law.”

Mortimer is beyond the prosecutors’ reach, so burn the widow! In addition to setting her free, the judge urged her to apply for a presidential pardon, which he promised to endorse.

Sorry about that $2.1 million. Remember the world’s thriftiest tax cheat, the one who stole $2.1 million from Oregon and used it to buy a 1999 Dodge Caravan and some tires? An apology from the director of the Oregon Department of Revenue didn’t go well, according to this report from OregonLive.com:

SALEM — A contrite director of the Oregon Department of Revenue appeared before a legislative committee Wednesday and apologized repeatedly for dropping the ball on a $2.1 million fraudulent tax refund. But both Democrats and Republicans weren’t in a forgiving mood, demanding to know why four workers who failed to catch the return weren’t fired and whether the agency can do its job.

“It’s not going to be enough to sit here and say you’re sorry,” said Rep. Cliff Bentz, R-Ontario.

Why are they so upset? He said he was sorry, after all?

Two managers and one administrative clerk received written reprimands but no change in their salaries. A fourth worker was demoted and transferred to another part of the agency. That person, an administrative specialist, got a pay cut from $45,396 a year to $41,208.

Why is Doug Shulman too darn busy to apologize for letting ID thieves loot the Treasury? Maybe because he’s spending his time making life miserable for Canadians. Tax Notes reports ($link) that Frustration Grows for Canadians in OVDI:

Taxpayers and their advisers asked the IRS for guidance on how to deal with RRSPs [Canadian retirement accounts] in the summer of 2011 but received inconsistent replies The IRS’s delay in issuing the guidance… annoyed taxpayers because, at least regarding the requests for a letter ruling granting 9100 relief, it caused them to incur professional fees that turned out to be unnecessary.

“This decision could have been made in September, October, even November, and the clients could have avoided the additional costs,” said [attorney] Ciraolo. “While we appreciate the 9100 relief offered under FAQ 54, the fact that the IRS failed to acknowledge the inconvenience and cost caused by the delayed guidance, and failed to address whether the Canadians in the OVDI would be eligible for the new program open on September 1, only furthered the belief of the Canadian taxpayers that the IRS is acting without due consideration to the circumstances of those taxpayers who entered the OVDI in good faith.”

Of course. The program has been haphazardly administered, treating innocent noncompliance with obscure IRS rules as presumptive evidence of offshore money-laundering.

The frustration that the delayed guidance on late elections to file Form 8891 has caused for U.S. practitioners and their Canadian clients exacerbated an increasingly tense diplomatic situation and perhaps convinced some Canadian taxpayers who sat out the 2011 OVDI that noncompliance was the right choice.

So we’ve provoked our closest neighbor while convincng many that non-compliance is safer than expecting the IRS to be fair. Well done, Commissioner!

This looks like one of those kinds of things that happen when staffing at a government agency is reduced beyond what is reasonable for the kinds of tasks that have to be carried out.

I’d be more sympathetic to that argument if Doug Shulman’s IRS hadn’t taken it upon itself to devote massive resources to an intrusive and futile preparer regulatory scheme at the behest of the big national tax preparation firms and to requiring massive amounts of futile paperwork for international compliance.

There has been lots of talk over the past few days about how Bain Capital executives have used management fee waivers to effectively lower their tax payments (a tactic that is not unique to Bain). Some academics have argued that such waivers are an illegal dodge, while private equity tax attorneys I’ve spoken with call it “aggressive but accepted by the IRS.”

Here is the basic structure: Bain officially charges 2% management fees to investors in its private equity funds. The idea is to cover overhead, such as salaries, office leases, electric bills, etc. But Bain has lots of other business lines (venture capital funds, hedge funds, etc.) that generate sufficient cash flow, so it “waives” the PE fund management fees…

Many commentators seem to think that Mitt Romney should have gone out of his way to pay the highest tax possible, rather than doing what his tax advisors and the rest of his industry did. I doubt that they direct their own preparers to forego deductions and exclusions that they think are poor policy or the result of poor administrative interpretations of the tax law.

I wonder if the Commissioner really understands how misfocused the program really is. Does he really understand the difference between whales and minnows, both of which he sweeps into the same net? Punishment should not be the same for both. Yet, the IRS offers a program of one size fits all, where the penalties [are the same] for the whales (most of whom are really bad guys in terms of tax noncompliance) and the minnows (most of who are not).

Does he understand? If the worst commissioner ever does understand, he sure has a funny way of showing it.

IRS Commissioner Douglas Shulman has no plans to respond in writing to National Taxpayer Advocate Nina Olson’s taxpayer advocate directive (TAD) on the IRS offshore voluntary disclosure program (OVDP) despite a statutory requirement that taxpayer advocate recommendations be responded to within 90 days, Olson said February 17.
According to Olson, who spoke at the Individual and Family Taxation session of the American Bar Association Section of Taxation meeting in San Diego, Shulman told her that section 7803(c), which requires the commissioner to formally respond to any taxpayer advocate recommendation within three months of its submission, applies only to the taxpayer advocate’s annual report and not to recommendations made through TADs or taxpayer assistance orders (TAOs).

(3) Responsibilities of Commissioner
The Commissioner shall establish procedures requiring a formal response to all recommendations submitted to the Commissioner by the National Taxpayer Advocate within 3 months after submission to the Commissioner.

That’s “all recommendations.” Not “all recommendations submitted in the annual report of the Taxpayer Advocate.” Not “all recommendations under this Section.” Just “all recommendations.” If there was a 50% annual penalty assessed on the balance of the Commissioner’s bank and retirement accounts for failing to respond on time — the same penalty that he is gleefully assessing on offshore account non-reporters — I bet he would have responded. After all, unlike the unwitting victims of the offshore compliance jaywalker hunt, it’s clear the Commissioner is well aware of this requirement.

In 2011, the total number of expatriates was 1,781, a 16% increase from 2010. Last year had the highest number of expatriates since at least 2004 (when I started keeping these records), and perhaps the most in any year in U.S. history.
According to the I.R.S., an estimated five to seven million U.S. citizens reside abroad. Many of these individuals have never lived in the U.S. and never expect to live in the U.S. However, these U.S. citizens must annually file U.S. tax returns.
For example, I spoke with a Canadian the other day who was born to two U.S. citizen parents in Canada. This individual therefore is a U.S. citizen. However, he has never lived in the U.S. and never expects to live in the U.S. Despite that he has never lived in the U.S., he will have to file U.S. tax returns for his entire working life.

The IRS hits people like these — many of whom had no idea they were supposed to be filing — with severe financial penalties. Meanwhile, it provides relatively cushy deals with actual criminals through its OVDI program, because you have to shoot the jaywalkers to really slap the wrists of the serious offenders. No wonder the jaywalkers don’t want to play anymore.
Update: The TaxProf has more.

Was GE’s conduct in this case any more morally upright or commendable than most of the persons who have been herded into OVDP 2009 and OVDI 2011 with far more draconian penalties? Yet, GE drew a relatively light 20% penalty.

The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.
The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.
“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation

Practitioners, including me, have been saying that the IRS administration of the offshore disclosure “amnesty” has been cruel and incompetent. Apparently Taxpayer Advocate Nina Olsen agrees, reports Tax Analysts in a shocking, and unfortunately gated, report:

Arguing that IRS examiners treated some participants in the 2009 offshore voluntary disclosure program (OVDP) unfairly, the national taxpayer advocate has invoked a rarely used administrative tool to try to force the IRS Large Business and International and Small Business/Self-Employed divisions to change their audit procedures. That dispute has escalated and now awaits a final decision by IRS Commissioner Douglas Shulman.
At issue is whether the IRS must revoke a March 1, 2011, memo directing examiners to stop accepting less than the 20 percent offshore penalty as apparently permitted in OVDP FAQ 35 and instead instruct those examiners to assume a violation was not willful unless they can prove otherwise.

It’s not encouraging that the decision rests in the hands of Commissioner Shulman, who hasn’t lifted a finger to intervene in a process that has infamously treated Americans abroad and U.S. residents with foreign accounts as presumed criminals, hitting minor and harmless violations of obscure rules with absurd fines.
The Tax Anaysts story explains that the Taxpayer Advocate Directive is the biggest gun in the Taxpayer Advocate’s arsenal, and is rarely used. It says the IRS overrode a provision in its own amnesty with a secret (now released) memo ruling out leniency towards inadvertent violators.
It remains to be seen whether Commissioner Shulman will start to undo the damage. It’s a big job. From the Tax Analysts story:

Practitioners echoed Olson’s concerns that the missteps in the OVDP have implications beyond the program participants. “It’s all about long-term compliance,” said [tax attorney Mark E.] Matthews. As a result of the hard-line approach in the OVDP and the OVDI, as well as the coming Foreign Account Tax Compliance Act reporting requirements, foreigners have become convinced that the IRS is liable to be unreasonable. “It is not going to be easy to fix that,” he said.

When he’s not busy fingerprinting tax preparers — after all, we’re all just itching to be criminals should the IRS let down its guard for a moment — IRS Commissioner Doug Shulman is busy trying to raid the pensions of Canadians working in the U.S. Phil Hodgen has the infuriating details.
Jack Townsend has more.

Attorney Jack Townsend has another must read post about the horrible administration of the IRS offshore voluntary compliance program — a program that treats an expat or green card holder who has tried to pay all taxes due just like it treats a money-laundering tax evader.

I am concerned that the IRS does not have any idea as to the damage it is doing among this group of people whose footfault was small on any relative scale and in many cases non-existent in terms of culpability (they really did not know they had income tax and FBAR reporting obligations).